Facebook Crashes Advertising Industry Party

LONDON/PARIS, July 1 (Reuters)- While traditional
advertising groups jostled for awards at a recent annual
industry gathering in Cannes, the year's biggest star was a
newcomer to the beaches: the social network Facebook.

The company has gone from nowhere a few years ago to become
the biggest single seller of online display advertising in the
United States with more than $2 billion in revenues this year,
according to research firm eMarketer.

Online ad sales have boomed in recent years largely because
they finely target consumers in a way that print media and TV
cannot match. Google and Amazon initially pioneered the trend by
analysing web surfing and internet searches to target customers'
tastes.

Now Facebook has brought a new level of sophistication to
the game: mining data from its social network about users' likes
and dislikes as well as those of friends to better target ads.

The 'social ad' approach can be seen in a current Facebook
campaign run by tennis racket maker Head. Users who link to Andy
Murray's page get updates from the player himself mixed in with
ads for his sponsor and jokey Youtube videos.

However there are risks involved for Facebook and other
online ad players as they develop ever more sophisticated ways
to track people's behaviour online.

Some regulators see such tracking as a violation of privacy
even when it is done anonymously. The Europe Union recently
required that web surfers be notified if the sites they visit
are collecting information about them, prompting howls from
industry.

The stakes are high: industry insiders and analysts say
brands are willing to pay more for such 'social ads' than they
would for traditional online ads since they see them as more
effective.

"Brands are willing to invest to learn how consumers
interact with their brand," said Mykim Chikli from Performics, a
division of Publicis, which helps big companies with online
advertising placement and strategy.

"You can target people who like golf, cars, and watches and
you can start to push ads to that profile of person."

In a demonstration of Facebook's current advertising power,
Google recently launched a social network dubbed Google+ in its
boldest attempt yet to crack the medium and tap the advertising
dollars it brings. [ID: nN1E75R1FO]

TARGETING TRANSFORMATION

The move toward social ads shows how the Internet is
transforming the whole industry.

Major companies from Nestle to Ford are increasing the
proportion of their ad spend on the Internet to the detriment of
traditional press ads and big ad agencies are scrambling to
evolve.

The changes have given birth to a slew of tech start-ups
trying to come up with more sophisticated ways to match ads to
consumers, often with sophisticated data mining techniques and
algorithms.

Among them is RadiumOne, a venture-backed start-up that
tracks people's social behaviour on-line by partnering with
niche social networks, blogs, and media-sharing sites and then
uses that data to target ads.

"When you share an article or email a Web link to a friend,
that's a very influential connection and we can track that
through cookies and then segment users into groups," Chief
Executive Gurbaksh Chahal told Reuters.

"Social data is immense," he said. "We've built some great
technology that can understand data and find an audience in the
real time and serve an ad that's relevant to them."

Martin Sorrell, the CEO of the world's biggest ad group WPP
, says there is room to improve the effectiveness of web
ads: "Online advertising is more sophisticated than offline, but
it's not got to where we think it can go yet."

TENTACLES

Facebook's influence is also spreading beyond its own site
as more webpages allow people to use their login details from
Facebook to enter instead of a separate password.

Users can then share content and post messages within those
sites as they would do on their social network, which in turn
allows the website to access their profile and determine the
user's likes and dislikes. Twitter has a similar system.

California-based start-up Gigya powers the buttons that
allow such sharing for about 5,000 sites, such as US broadcaster
ABC and sports apparel maker Nike.

"Someone like Nike is getting access to that extremely rich
data that it wouldn't have been able to access otherwise," Gigya
Chief Executive Patrick Salyer said in an interview.

Beyond more sophisticated targeting, Facebook also serves to
amplify traditional word of mouth on everything from new movies
to the latest smartphone.

"If I have a good experience with a brand I'll tell a person
offline -- I might tell my friend -- but if I do it on Facebook
the average person is telling 130 people," said Facebook Chief
Operating Officer Sheryl Sandberg.

"We think that explains the very healthy growth of our
advertising business."

By Kate Holton and Leila Abboud LONDON/PARIS, July 1 (Reuters)- While traditional
advertising groups jostled for awards at a recent annual
industry gathering in Cannes, the year's biggest star was a
newcomer to the beaches: the social network Facebook. The company has...